Labor Department finalizes joint employer rule

The U.S. Department of Labor issued its final joint employer rule Sunday.

The rule finalizes the four-factor “balancing test,” which was first proposed by the department in April, for determining joint employer status under the Fair Labor Standards Act. The DOL said in its announcement that the regulation had not been meaningfully updated in more than 60 years.

An expert said the final rule is a “qualified positive” for employers.

Under the FLSA, the employee may have, in addition to his or her employer, one or more joint employers that are jointly and severally liable with the employer for the employee’s wages, said the DOL in its statement.

The FLSA requires covered employers to pay their employees at least the federal minimum wage for every hour worked and overtime for every hour worked over 40 in the workweek.

Employment situations where the issue may arise include staffing agencies, subcontractors and franchise operations.

The balancing test in the finalized rule examines whether the potential joint employer: hires or fires the employee; supervises and controls the employee’s work schedule or conditions of employment to a substantial degree; determines the employee’s rate and method of payment; and maintains the employee’s employment records.

“This final rule furthers President Trump’s successful, governmentwide effort to address regulations that hinder the American economy and to promote economic growth,” said Secretary of Labor Eugene Scalia, in the statement. “By giving greater clarity to businesses who want to work together, we promote an entrepreneurial culture that has driven American prosperity for decades.”

The department announced in 2017 it was withdrawing the Obama administration’s joint employment and independent contractors guidances, which expanded the definition of employees. The withdrawal was described as a welcome relief to employers.

“It’s a qualified positive for employers,” said Marty Heller, of counsel with Fisher & Phillips LLP in Atlanta, who represents employers, of the new rule.  “It’s good, but it’s not great.”

Mr. Heller said, “There’s still some ambiguity in the rule, and I think that’s going to lead to a significant period of lawsuits to try and clarify what some of the rule means.”

Addressing employers, Mr. Heller said in response to the new rule, “You’re going to want to re-evaluate your relationship with third parties over whom you have any control of their employees.

“And, at least what I’m telling my clients is, if you’ve never had what you think is a close call on joint employment, now is the time to re-evaluate it and if you can shore up some of your defenses.”